- Quarterly Report (10-Q)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012.

Or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission File Number
000-06217

INTEL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

94-1672743

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

2200 Mission College Boulevard, Santa
Clara, California

95054-1549

(Address of principal executive offices)

(Zip Code)

(408) 765-8080

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
þ
No
¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes
þ
No
¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer
þ

Accelerated filer
¨

Non-accelerated filer
¨

Smaller reporting company
¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
þ

Property, plant and equipment, net of accumulated depreciation of $35,575 ($34,446 as of December 31,
2011)

25,027

23,627

Marketable equity securities

819

562

Other long-term investments

498

889

Goodwill

9,388

9,254

Identified intangible assets, net

6,064

6,267

Other long-term assets

4,600

4,648

Total assets

$

71,817

$

71,119

Liabilities and stockholders equity

Current liabilities:

Short-term debt

$

362

$

247

Accounts payable

2,993

2,956

Accrued compensation and benefits

1,498

2,948

Accrued advertising

1,095

1,134

Deferred income

2,001

1,929

Other accrued liabilities

3,992

2,814

Total current liabilities

11,941

12,028

Long-term debt

7,088

7,084

Long-term deferred tax liabilities

2,793

2,617

Other long-term liabilities

3,235

3,479

Contingencies (Note 20)

Stockholders equity:

Preferred stock





Common stock and capital in excess of par value, 5,006 shares issued and outstanding (5,000 as of December 31,
2011)

18,381

17,036

Accumulated other comprehensive income (loss)

(604

)

(781

)

Retained earnings

28,983

29,656

Total stockholders equity

46,760

45,911

Total liabilities and stockholders equity

$

71,817

$

71,119

See accompanying notes.

4

INTEL CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

(In Millions)

March 31,
2012

April 2,
2011

Cash and cash equivalents, beginning of period

$

5,065

$

5,498

Cash flows provided by (used for) operating activities:

Net income

2,738

3,160

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

1,519

1,287

Share-based compensation

274

300

Excess tax benefit from share-based payment arrangements

(19

)

(1

)

Amortization of intangibles

266

155

(Gains) losses on equity investments, net

19

(28

)

(Gains) losses on divestitures



(164

)

Deferred taxes

(45

)

(109

)

Changes in assets and liabilities:

Accounts receivable

(387

)

(504

)

Inventories

(381

)

(251

)

Accounts payable

37

404

Accrued compensation and benefits

(1,450

)

(1,401

)

Income taxes payable and receivable

760

1,032

Other assets and liabilities

(359

)

133

Total adjustments

234

853

Net cash provided by operating activities

2,972

4,013

Cash flows provided by (used for) investing activities:

Additions to property, plant and equipment

(2,974

)

(2,723

)

Acquisitions, net of cash acquired

(176

)

(8,216

)

Purchases of available-for-sale investments

(1,529

)

(3,569

)

Sales of available-for-sale investments

333

7,594

Maturities of available-for-sale investments

1,827

5,172

Purchases of trading assets

(4,303

)

(1,540

)

Maturities and sales of trading assets

4,567

2,578

Collection of loans receivable

133



Investments in non-marketable equity investments

(116

)

(147

)

Return of equity method investments

67

24

Proceeds from divestitures



50

Other investing

60

133

Net cash used for investing activities

(2,111

)

(644

)

Cash flows provided by (used for) financing activities:

Increase (decrease) in short-term debt, net

115

16

Proceeds from government grants



56

Excess tax benefit from share-based payment arrangements

19

1

Proceeds from sales of shares through employee equity incentive plans

1,244

239

Repurchase of common stock

(1,519

)

(4,006

)

Payment of dividends to stockholders

(1,049

)

(994

)

Other financing

(305

)



Net cash used for financing activities

(1,495

)

(4,688

)

Effect of exchange rate fluctuations on cash and cash equivalents

(2

)

9

Net increase (decrease) in cash and cash equivalents

(636

)

(1,310

)

Cash and cash equivalents, end of period

$

4,429

$

4,188

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest, net of amounts capitalized

$



$



Income taxes, net of refunds

$

376

$

269

See accompanying notes.

5

INTEL CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  Unaudited

Note 1: Basis of Presentation

We prepared our interim consolidated condensed financial statements that accompany these notes in conformity with U.S. generally
accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2011.

We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2012 is a 52-week fiscal year, and the first quarter of 2012 was a 13-week quarter. Fiscal year 2011 was a
53-week fiscal year, and the first quarter of 2011 was a 14-week quarter.

We have made estimates and judgments affecting the amounts reported
in our consolidated condensed financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, but reflects all normal adjustments that
are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year
ended December 31, 2011.

Note 2: Accounting Changes

In the first quarter of 2012, we adopted amended standards that increase the prominence of items reported in other comprehensive
income. These amended standards eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders equity and require that all changes in stockholders equityexcept
investments by, and distributions to, ownersbe presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The adoption of these amended standards did impact the presentation of
other comprehensive income, as we have elected to present two separate but consecutive statements, but did not have an impact on our financial position or results of operations.

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or
liability. Our financial assets and liabilities are measured and recorded at fair value, except for equity method investments, cost method investments, cost method loans receivable, and most of our liabilities.

Fair Value Hierarchy

The three levels
of inputs that may be used to measure fair value are as follows:

Level 2.
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted
prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data
for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific
restrictions.

Level 3.
Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of
assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.

Our policy is to reflect transfers between levels at the beginning of the quarter in which a change in circumstances resulted in the transfer.

Marketable Debt Instruments

Marketable debt instruments include instruments such as
commercial paper, corporate bonds, government bonds, bank deposits, asset-backed securities, municipal bonds, and money market fund deposits. When we use observable market prices for identical securities that are traded in less active markets, we
classify our marketable debt instruments as Level 2. When observable market prices for identical securities are not available, we price our marketable debt instruments using non-binding market consensus prices that are corroborated with observable
market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based
on the proprietary valuation models of pricing providers or brokers. These valuation models incorporate a number of inputs, including non-binding and binding broker quotes; observable market prices for identical or similar securities; and the
internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs. We corroborate non-binding market consensus prices with observable market data using statistical models when
observable market data exists. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings.

Our marketable debt instruments that are classified as Level 3 are classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the
non-binding broker quotes. When observable market data is not available, we corroborate our fair value measurements using non-binding market consensus prices and non-binding broker quotes from a second source.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments as of March 31, 2012
and December 31, 2011:

March 31, 2012

December 31, 2011

Fair Value Measured and Recorded at
Reporting Date
Using

Fair Value Measured and Recorded at
Reporting Date
Using

(In Millions)

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Cash equivalents:

Commercial paper

$



$

2,203

$



$

2,203

$



$

2,408

$



$

2,408

Bank deposits



880



880



795



795

Money market fund deposits

471





471

546





546

Government bonds



100



100

650





650

Short-term investments:

Government bonds

2,850

398



3,248

2,690

310



3,000

Commercial paper



958



958



1,409



1,409

Corporate bonds

78

375

35

488

120

428

28

576

Bank deposits



318



318



196



196

Trading assets:

Government bonds

1,729

1,338



3,067

1,698

1,317



3,015

Corporate bonds

216

383



599

202

486



688

Municipal bonds



260



260



284



284

Bank deposits



140



140



135



135

Commercial paper



124



124



305



305

Asset-backed securities





101

101





115

115

Money market fund deposits

21





21

49





49

Other current assets:

Derivative assets



108

5

113



159

7

166

Loans receivable



33



33



33



33

Marketable equity securities

694

125



819

522

40



562

Other long-term investments:

Corporate bonds



237

30

267



282

39

321

Government bonds



161



161

177

300



477

Bank deposits



55



55



55



55

Asset-backed securities





15

15





36

36

Other long-term assets:

Loans receivable



747



747



715



715

Derivative assets



24

28

52



34

29

63

Total assets measured and recorded at fair value

$

6,059

$

8,967

$

214

$

15,240

$

6,654

$

9,691

$

254

$

16,599

Liabilities

Other accrued liabilities:

Derivative liabilities

$



$

275

$

9

$

284

$



$

280

$

8

$

288

Long-term debt





128

128





131

131

Other long-term liabilities:

Derivative liabilities



40



40



27



27

Total liabilities measured and recorded at fair value

$



$

315

$

137

$

452

$



$

307

$

139

$

446

Government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include
instruments such as non-U.S. government bonds, U.S. Treasury securities, and U.S. agency securities.

We elected the fair value option for loans made to third parties when the interest rate or foreign exchange rate risk was hedged at inception with a
related derivative instrument. As of March 31, 2012, the fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency. These
loans receivable are classified within other current assets and other long-term assets. Fair value is determined using a discounted cash flow model with all significant inputs derived from or corroborated with observable market data. Gains and
losses from changes in fair value on the loans receivable and related derivative instruments, as well as interest income, are recorded in interest and other, net. During all periods presented, changes in the fair value of our loans receivable were
largely offset by changes in the related derivative instruments, resulting in an insignificant net impact on our consolidated condensed statements of income. Gains and losses attributable to changes in credit risk are determined using observable
credit default spreads for the issuer or comparable companies and were insignificant during all periods presented. We did not elect the fair value option for loans when the interest rate or foreign exchange rate risk was not hedged at inception with
a related derivative instrument.

We elected the fair value option for the bonds issued in 2007 by the Industrial Development Authority of the
City of Chandler, Arizona (2007 Arizona bonds). In connection with the 2007 Arizona bonds, we entered into a total return swap agreement that effectively converts the fixed-rate obligation on the bonds to a floating U.S.-dollar LIBOR-based rate. As
a result, changes in the fair value of this debt are largely offset by changes in the fair value of the total return swap agreement, without the need to apply hedge accounting provisions. The 2007 Arizona bonds are included in long-term debt. As of
March 31, 2012 and December 31, 2011, no other instruments were similar to the 2007 Arizona bonds for which we elected fair value treatment.

As of March 31, 2012, the fair value of the 2007 Arizona bonds did not significantly differ from the contractual principal balance. The fair value of the 2007 Arizona bonds was determined using
inputs that are observable in the market or that can be derived from or corroborated with observable market data, as well as unobservable inputs that were significant to the fair value. Gains and losses on the 2007 Arizona bonds and the related
total return swap are recorded in interest and other, net. We capitalize a portion of the interest associated with the 2007 Arizona bonds. We add capitalized interest to the cost of qualified assets and amortize it over the estimated useful lives of
the assets. The remaining interest associated with the 2007 Arizona bonds is recorded as interest expense in interest and other, net.

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

Our non-marketable equity investments (non-marketable equity method and cost method investments) and non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair
value only if an impairment charge is recognized. During the first quarter of 2012, we recognized $59 million of impairment charges on non-marketable equity investments held as of March 31, 2012 ($14 million of impairment charges during first
quarter of 2011 for non-marketable equity investments held as of April 2, 2011). The fair value of these non-marketable equity investments at the time of impairment recognition was $11 million during the first quarter of 2012 ($19 million
during the first quarter of 2011). All of these assets were categorized as Level 3 in the fair value hierarchy.

A portion of our
non-marketable equity investments was measured and recorded at fair value due to events or circumstances that significantly impacted the fair value of those investments, resulting in other-than-temporary impairment charges. We classified these
measurements as Level 3, as we used unobservable inputs to the valuation methodologies that were significant to the fair value measurements, and the valuations required management judgment due to the absence of quoted market prices.

We measure the fair value of our non-marketable cost method investments, indebtedness carried at amortized cost, and cost method loans receivable
quarterly for disclosure purposes; however, the assets are recorded at fair value only when an impairment charge is recognized. The carrying amounts and fair values of financial instruments not recorded at fair value on a recurring basis as of
March 31, 2012 and December 31, 2011 were as follows:

March 31, 2012

(In Millions)

Carrying
Amount

Fair Value Measured Using

Total
Fair Value

Level 1

Level 2

Level 3

Non-marketable cost method investments

$

1,116

$



$



$

1,697

$

1,697

Long-term debt

$

6,960

$

5,190

$

2,653

$



$

7,843

Short-term debt

$

273

$



$

273

$



$

273

NVIDIA Corporation cross-license agreement liability

$

861

$



$

881

$



$

881

December 31, 2011

(In Millions)

Carrying
Amount

Fair Value Measured Using

Total

Level 1

Level 2

Level 3

Fair Value

Non-marketable cost method investments

$

1,129

$



$



$

1,861

$

1,861

Loans receivable

$

132

$



$

132

$



$

132

Long-term debt

$

6,953

$

5,287

$

2,448

$



$

7,735

Short-term debt

$

200

$



$

200

$



$

200

NVIDIA Corporation cross-license agreement liability

$

1,156

$



$

1,174

$



$

1,174

As of March 31, 2012 and December 31, 2011, the unrealized loss position of our non-marketable cost method
investments was not significant.

Our non-marketable equity investments are valued using the market and income approaches. The market approach
includes the use of financial metrics and ratios of comparable public companies. The selection of comparable companies requires management judgment and is based on a number of factors, including comparable companies sizes, growth rates,
industries, development stages, and other relevant factors. The income approach includes the use of a discounted cash flow model, which requires the following significant estimates for the investee: revenue, costs, and discount rates based on the
risk profile of comparable companies. Estimates of revenues and costs are developed using available market, historical, and forecast data. The valuation of these non-marketable cost method investments also takes into account variables such as
conditions reflected in the capital markets, recent financing activities by the investees, the investees capital structure, the terms of the investees issued interests, and the lack of marketability of the investments.

The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $780 million as of March 31, 2012
($748 million as of December 31, 2011). The carrying amount and fair value of long-term debt exclude long-term debt measured and recorded at a fair value of $128 million as of March 31, 2012 ($131 million as of December 31, 2011).
Short-term debt includes our commercial paper outstanding as of March 31, 2012 and December 31, 2011, and the carrying amount and fair value exclude drafts payable.

The fair value of our loans receivable, including those held at fair value, is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable
market data, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. The credit quality of our loans receivable remains high, with credit ratings of A+/A1 or better as of March 31, 2012. Our long-term debt
recognized at amortized cost is comprised of our senior notes and our convertible debentures. The fair value of our senior notes is determined using active market prices, and is thereby classified as Level 1. The fair value of our convertible
long-term debt is determined using discounted cash flow models with observable market inputs and takes into consideration variables such as risk-free rate, comparable securities, subordination discount, credit-rating changes and interest rate
changes.

The NVIDIA Corporation cross-license agreement liability in the preceding table was incurred as a result of entering into a
long-term patent cross-license agreement with NVIDIA in January 2011. We agreed to make payments to NVIDIA over six years. As of March 31, 2012 and December 31, 2011, the carrying amount of the liability arising from the agreement was
classified within other accrued liabilities and other long-term liabilities, as applicable. The fair value is determined using a discounted cash flow model which discounts future cash flows using our incremental borrowing rates.

As of March 31, 2012 and December 31, 2011, trading assets were comprised of marketable debt instruments. Net losses related
to trading assets still held at the reporting date were $20 million in the first quarter of 2012 (net gains of $61 million in the first quarter of 2011). Net gains on the related derivatives were $28 million in the first quarter of 2012 (net
losses of $50 million in the first quarter of 2011).

Net gains on marketable equity securities classified as trading assets still held at
April 2, 2011, excluding the impacts of the related derivatives, were $144 million in the first quarter of 2011.

Note 5: Available-for-Sale Investments

Available-for-sale investments as of March 31, 2012 and December 31, 2011 were as follows:

March 31, 2012

December 31, 2011

(In Millions)

Adjusted
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Adjusted
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Government bonds

$

3,510

$

1

$

(2

)

$

3,509

$

4,131

$



$

(4

)

$

4,127

Commercial paper

3,162



(1

)

3,161

3,820



(3

)

3,817

Bank deposits

1,252

1



1,253

1,046

1

(1

)

1,046

Marketable equity securities

208

613

(2

)

819

189

385

(12

)

562

Corporate bonds

746

13

(4

)

755

892

14

(9

)

897

Money market fund deposits

471





471

546





546

Asset-backed securities

18



(3

)

15

48



(12

)

36

Total available-for-sale investments

$

9,367

$

628

$

(12

)

$

9,983

$

10,672

$

400

$

(41

)

$

11,031

In the preceding table, government bonds include bonds issued or deemed to be guaranteed by government entities.
Government bonds include instruments such as U.S. Treasury securities, non-U.S. government bonds, and U.S. agency securities as of March 31, 2012 and December 31, 2011.

The amortized cost and fair value of available-for-sale debt investments as of March 31, 2012, by contractual maturity, were as follows:

(In Millions)

Cost

Fair Value

Due in 1 year or less

$

8,187

$

8,194

Due in 12 years

218

223

Due in 25 years

262

259

Due after 5 years

3

2

Instruments not due at a single maturity date

489

486

Total

$

9,159

$

9,164

Instruments not due at a single maturity date in the preceding table include asset-backed securities and money market
fund deposits.

In the first quarter of 2012, we sold available-for-sale investments for proceeds of $333 million ($7.6 billion in the
first quarter of 2011). The gross realized gains on sales of available-for-sale investments were insignificant in the first quarter of 2012 ($28 million in the first quarter of 2011) and were primarily related to our sales of marketable equity
securities. We determine the cost of an investment sold on an average cost basis at the individual security level.

The before-tax net unrealized holding gains (losses) on available-for-sale investments that have been
included in other comprehensive income (loss) and the before-tax net gains (losses) reclassified from accumulated other comprehensive income (loss) into earnings were as follows:

$4,489

$4,489

Three Months Ended

(In Millions)

March 31,
2012

April 2,
2011

Net unrealized holding gains (losses) included in other
comprehensive income (loss)

$

252

$

36

Net gains (losses) reclassified from accumulated other comprehensive
income (loss) into earnings

$

(5

)

$

44

Note 6: Inventories

Inventories at the end of each period were as follows:

$4,489

$4,489

(In Millions)

March 31,
2012

Dec. 31,
2011

Raw materials

$

646

$

644

Work in process

2,048

1,680

Finished goods

1,795

1,772

Total inventories

$

4,489

$

4,096

Note 7: Derivative Financial Instruments

Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk,
and, to a lesser extent, equity market risk and commodity price risk. We currently do not hold derivative instruments for the purpose of managing credit risk since we limit the amount of credit exposure to any one counterparty and generally enter
into derivative transactions with high-credit-quality counterparties. We also enter into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow
counterparties to net settle amounts owed to each other as a result of multiple, separate derivative transactions. For presentation on our consolidated condensed balance sheets, we do not offset fair value amounts recognized for derivative
instruments under master netting arrangements.

Currency Exchange Rate Risk

We are exposed to currency exchange rate risk and generally hedge our exposures with currency forward contracts, currency interest rate swaps, or currency
options. Substantially all of our revenue is transacted in U.S. dollars. However, a significant amount of our operating expenditures and capital purchases are incurred in or exposed to other currencies, primarily the Japanese yen, the euro, and the
Israeli shekel. We have established balance sheet and forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of the functional currency equivalent of future cash flows caused by
changes in exchange rates. Our non-U.S.-dollar-denominated investments in debt instruments and loans receivable are generally hedged with offsetting currency forward contracts or currency interest rate swaps. These programs reduce, but do not
entirely eliminate, the impact of currency exchange movements.

Our currency risk management programs include:



Currency derivatives with cash flow hedge accounting designation
that utilize currency forward contracts and currency options to hedge exposures
to the variability in the U.S.-dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. These instruments generally mature within 12 months. For these derivatives, we report the after-tax gain or loss from the effective portion
of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated condensed
statements of income as the impact of the hedged transaction.



Currency derivatives without hedge accounting designation
that utilize currency forward contracts or currency interest rate swaps to
economically hedge the functional currency equivalent cash flows of recognized monetary assets and liabilities, non-U.S.-dollar-denominated debt instruments classified as trading assets, and hedges of non-U.S.-dollar-denominated loans receivable
recognized at fair value. The majority of these instruments mature within 12 months. Changes in the functional currency equivalent cash flows of the underlying assets and liabilities are approximately offset by the changes in fair values of the
related derivatives. We record net gains or losses in the line item on the consolidated condensed statements of income most closely associated with the related exposures, primarily in interest and other, net, except for equity-related gains or
losses, which we primarily record in gains (losses) on equity investments, net.

Our primary objective for holding investments in debt instruments is to preserve principal while maximizing yields. We generally swap the returns on our investments in fixed-rate debt instruments with
remaining maturities longer than six months into U.S.-dollar three-month LIBOR-based returns, unless management specifically approves otherwise. These swaps are settled at various interest payment times involving cash payments at each interest and
principal payment date, with the majority of the contracts having quarterly payments.

Our interest rate risk management programs include:



Interest rate derivatives with cash flow hedge accounting designation
that utilize interest rate swap agreements to modify the interest
characteristics of debt instruments. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same
period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated condensed statements of income as the impact of the hedged transaction.



Interest rate derivatives without hedge accounting designation
that utilize interest rate swaps and currency interest rate swaps in economic
hedging transactions, including hedges of non-U.S.-dollar-denominated debt instruments classified as trading assets, and hedges of non-U.S.-dollar-denominated loans receivable recognized at fair value. Floating interest rates on the swaps are reset
on a quarterly basis. Changes in fair value of the debt instruments classified as trading assets and hedges of loans receivable recognized at fair value are generally offset by changes in fair value of the related derivatives, both of which are
recorded in interest and other, net.

Equity Market Risk

Our marketable investments include marketable equity securities and equity derivative instruments. To the extent that our marketable equity securities
have strategic value, we typically do not attempt to reduce or eliminate our equity market exposure through hedging activities. We may enter into transactions to reduce or eliminate the equity market risks for our investments in strategic equity
derivative instruments. For securities that we no longer consider strategic, we evaluate legal, market, and economic factors in our decision on the timing of disposal and whether it is possible and appropriate to hedge the equity market risk. Our
equity market risk management program includes equity derivatives without hedge accounting designation that utilize warrants, equity options, or other equity derivatives. We recognize changes in the fair value of such derivatives in gains (losses)
on equity investments, net. We also utilize total return swaps to offset changes in liabilities related to the equity market risks of certain deferred compensation arrangements. Gains and losses from changes in fair value of these total return swaps
are generally offset by the gains and losses on the related liabilities, both of which are recorded in cost of sales and operating expenses.

Commodity Price Risk

We operate
facilities that consume commodities, and have established forecasted transaction risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in commodity prices, such as those for
natural gas. These programs reduce, but do not always entirely eliminate, the impact of commodity price movements.

Our commodity price risk
management program includes commodity derivatives with cash flow hedge accounting designation that utilize commodity swap contracts to hedge future cash flow exposures to the variability in commodity prices. These instruments generally mature within
12 months. For these derivatives, we report the after-tax gain (loss) from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in which
the hedged transaction affects earnings, and in the same line item on the consolidated condensed statements of income as the impact of the hedged transaction.

Gains and losses on derivative instruments in cash flow hedging relationships related to hedge ineffectiveness and
amounts excluded from effectiveness testing were insignificant during all periods presented in the preceding tables. We estimate that we will reclassify approximately $55 million (before taxes) of net derivative losses included in accumulated
other comprehensive income (loss) into earnings within the next 12 months. For all periods presented, there was an insignificant impact on results of operations from discontinued cash flow hedges as a result of forecasted transactions that were
not probable to occur.

Derivatives Not Designated as Hedging Instruments

The effects of derivative instruments not designated as hedging instruments on the consolidated condensed statements of income were as follows:

Micron Technology, Inc. and Intel formed IM Flash Technologies, LLC (IMFT) and IM Flash Singapore, LLP (IMFS) to manufacture NAND flash memory products
for Micron and Intel. As of March 31, 2012, we owned a 49% interest in IMFT and an 18% interest in IMFS. The carrying value of our investment in IMFT/IMFS was $1.3 billion as of March 31, 2012 ($1.3 billion as of December 31, 2011)
and is classified within other long-term assets.

These joint ventures are variable interest entities. All costs of the joint ventures are
passed on to Micron and Intel through our purchase agreements. The joint ventures are dependent upon Micron and Intel for any additional cash requirements. Our portion of IMFT/IMFS costs, primarily related to product purchases and production-related
services, was approximately $240 million during the first quarter of 2012 (approximately $220 million during the first quarter of 2011). The amount due to IMFT/IMFS for product purchases and services provided was approximately $95 million as of
March 31, 2012 (approximately $125 million as of December 31, 2011). Finally, $67 million was returned to Intel by IMFT/IMFS during the first quarter of 2012, which is reflected as a return of equity method investment within investing
activities on the consolidated condensed statements of cash flows ($24 million during the first quarter of 2011).

Subsequent to the end of
the first quarter of 2012, we completed agreements with Micron to expand our joint venture relationship. Under the new structure, we own a 49% interest in the remaining assets held by IMFT and no longer hold an ownership interest in IMFS. We also
entered into an amended operating agreement for IMFT, which extends the term of IMFT to 2024, unless earlier terminated under certain terms and conditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to
NAND flash memory. These agreements include a NAND Flash supply agreement for Micron to supply us NAND products. Additionally, we received approximately $600 million from the sale of assets of IMFS and certain assets of IMFT to Micron. We provided
approximately $365 million to Micron, which we expect will primarily be applied to future product purchases under the supply agreement with Micron. Additionally, the agreements extend Intel and Microns NAND joint development program and expand
it to include emerging memory technologies. Finally, the amended agreement also provides for certain buy-sell rights, beginning in 2015, under which we may elect to sell to Micron, or Micron may elect to purchase from us, our interest in IMFT. If
Intel elects to exercise this right, Micron would set the closing date of the transaction within two years following such election and could elect to receive financing from Intel for one to two years.

We expect the closing of the joint venture expansion to have an insignificant impact on our consolidated condensed statements of income for the second
quarter of 2012.

Subsequent to the closing of the transaction in the second quarter of 2012, our known maximum exposure to loss is $656
million, which approximated the carrying value of our investment balance in IMFT. Except for the amount due to IMFT for product purchases and services, we did not have any additional liabilities recognized on our consolidated condensed balance
sheets in connection with our interests in these joint ventures as of March 31, 2012. In addition, our potential future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future operating
costs or obligations of IMFT. Future cash calls could also increase our investment balance and the related exposure to loss. Finally, as we are currently committed to purchasing 49% of IMFTs production output and production-related services,
we may be required to purchase products at a cost in excess of realizable value.

Under the accounting standards for consolidating variable
interest entities, the consolidating investor is the entity with the power to direct the activities of the venture that most significantly impact the ventures economic performance and with the obligation to absorb losses or the right to
receive benefits from the venture that could potentially be significant to the venture. We have determined that we do not have both of these characteristics and, therefore, we account for our interest in IMFT and our previous interest in IMFS using
the equity method of accounting.

Interest expense in the preceding table is net of $50 million of interest capitalized in the first quarter of 2012 ($44
million in the first quarter of 2011).

Note 12: Acquisitions

During the first quarter of 2012, we completed four acquisitions qualifying as business combinations in exchange for aggregate net cash
consideration of $176 million. Substantially all of the consideration was allocated to goodwill and intangibles.

Note 13: Goodwill

Goodwill activity for the first quarter of 2012 was as follows:

(In Millions)

PC Client
Group

Data Center
Group

Other Intel
Architecture
Operating
Segments

Software
and
Services
Operating
Segments

Unallocated

Total

December 31, 2011

$

2,918

$

1,553

$

844

$

3,939

$



$

9,254

Additions due to acquisitions

12

90



5

7

114

Effect of exchange rate fluctuations







20



20

March 31, 2012

$

2,930

$

1,643

$

844

$

3,964

$

7

$

9,388

No goodwill was impaired during the first quarter of 2012 and 2011, and the accumulated impairment losses as of
March 31, 2012 and December 31, 2011 were $713 million: $341 million associated with our PC Client Group, $279 million associated with our Data Center Group, and $93 million associated with other Intel architecture operating segments.

Identified intangible assets at the end of each period were as follows:

$(1,302)

$(1,302)

$(1,302)

March 31, 2012

(In Millions)

Gross Assets

Accumulated
Amortization

Net

Acquisition-related developed technology

$

2,633

$

(693

)

$

1,940

Acquisition-related customer relationships

1,714

(331

)

1,383

Acquisition-related trade names

68

(24

)

44

Licensed technology

2,398

(755

)

1,643

Identified intangible assets subject to amortization

$

6,813

$

(1,803

)

$

5,010

Acquisition-related trade names

810



810

Other intangible assets

244



244

Identified intangible assets not subject to amortization

$

1,054

$



$

1,054

Total identified intangible assets

$

7,867

$

(1,803

)

$

6,064

$(1,302)

$(1,302)

$(1,302)

December 31, 2011

(In Millions)

Gross Assets

Accumulated
Amortization

Net

Acquisition-related developed technology

$

2,615

$

(570

)

$

2,045

Acquisition-related customer relationships

1,714

(254

)

1,460

Acquisition-related trade names

68

(21

)

47

Licensed technology

2,395

(707

)

1,688

Identified intangible assets subject to amortization

$

6,792

$

(1,552

)

$

5,240

Acquisition-related trade names

806



806

Other intangible assets

221



221

Identified intangible assets not subject to amortization

$

1,027

$



$

1,027

Total identified intangible assets

$

7,819

$

(1,552

)

$

6,267

For identified intangible assets that are subject to amortization, we recorded amortization expense on the consolidated
condensed statements of income as follows: substantially all amortization of acquisition-related developed technology and licensed technology is included in cost of sales, and amortization of acquisition-related customer relationships and trade
names is included in amortization of acquisition-related intangibles.

Amortization expenses for the periods indicated were as follows:

March 31,000

March 31,000

Three Months Ended

(In Millions)

March 31,
2012

April 2,
2011

Acquisition-related developed technology

$

137

$

73

Acquisition-related customer relationships

$

78

$

34

Acquisition-related trade names

$

3

$

2

Licensed technology

$

48

$

46

Based on the identified intangible assets that are subject to amortization as of March 31, 2012, we expect future
amortization expense to be as follows:

Under the 2006 Equity Incentive Plan (the 2006 Plan), 596 million shares of common stock have been made
available for issuance as equity awards to employees and non-employee directors. A maximum of 394 million of these shares can be awarded as non-vested shares (restricted stock) or non-vested share units (restricted stock units). As of
March 31, 2012, 300 million shares remained available for future grant under the 2006 Plan.

The 2006 Stock Purchase Plan allows
eligible employees to purchase shares of our common stock at 85% of the value of our common stock on specific dates. Rights to purchase shares are granted during the first and third quarters of each year. Under the 2006 Stock Purchase Plan, we made
373 million shares of common stock available for issuance through August 2016. As of March 31, 2012, 244 million shares were available for issuance under the 2006 Stock Purchase Plan.

Restricted Stock Unit Awards

Activity with respect to outstanding restricted stock units (RSUs) for the first quarter of 2012 was as follows:

(In Millions, Except Per RSU Amounts)

Number of
RSUs

Weighted
Average
Grant-Date
Fair Value

December 31, 2011

107.0

$

19.18

Granted

4.6

$

27.36

Vested

(2.7

)

$

19.96

Forfeited

(1.3

)

$

19.26

March 31, 2012

107.6

$

19.51

As of March 31, 2012, 5 million of the outstanding restricted stock units were market-based restricted stock
units.

Activity with respect to outstanding stock options for the first quarter of 2012 was as follows:

Exercise Price

Exercise Price

(In Millions, Except Per Option Amounts)

Number of
Options

Weighted
Average
Exercise Price

December 31, 2011

298.3

$

20.12

Granted

3.8

$

26.79

Exercised

(50.1

)

$

20.90

Cancelled and forfeited

(1.4

)

$

21.34

Expired

(0.9

)

$

30.01

March 31, 2012

249.7

$

20.02

Options exercisable as of:

December 31, 2011

203.6

$

20.44

March 31, 2012

155.5

$

20.21

Stock Purchase Plan

Employees purchased 10.3 million shares in the first quarter of 2012 (10.3 million shares in the first quarter of 2011) for $197 million ($181 million in the first quarter of 2011) under the 2006
Stock Purchase Plan.

Note 17: Common Stock Repurchases

Common Stock Repurchase Program

We have an ongoing authorization, since October 2005, as amended, from our Board of Directors to repurchase up to $45 billion in shares of our common stock in open market or negotiated transactions.
As of March 31, 2012, $8.6 billion remained available for repurchase under the existing repurchase authorization limit. During the first quarter of 2012, we repurchased 56.9 million shares of common stock at a cost of $1.5 billion.
During the first quarter of 2011, we repurchased 189.1 million shares of common stock at a cost of $4.0 billion. We have repurchased 4.1 billion shares at a cost of $86 billion since the program began in 1990.

Note 18: Earnings Per Share

We computed our basic and diluted earnings per common share as follows:

Three Months Ended

(In Millions, Except Per Share Amounts)

March 31,
2012

April 2,
2011

Net income available to common stockholders

$

2,738

$

3,160

Weighted average common shares outstanding  basic

4,999

5,452

Dilutive effect of employee equity incentive plans

126

102

Dilutive effect of convertible debt

67

52

Weighted average common shares outstanding  diluted

5,192

5,606

Basic earnings per common share

$

0.55

$

0.58

Diluted earnings per common share

$

0.53

$

0.56

We computed our basic earnings per common share using net income available to common stockholders and the weighted
average number of common shares outstanding during the period. We computed diluted earnings per common share using net income available to common stockholders and the weighted average number of common shares outstanding plus potentially dilutive
common shares outstanding during the period. Net income available to participating securities was insignificant for all periods presented.

Potentially dilutive common shares from employee incentive plans are determined by applying the treasury
stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units, and the assumed issuance of common stock under the stock purchase plan. Potentially dilutive common shares are determined
by applying the if-converted method for our 2005 debentures. However, as our 2009 debentures require settlement of the principal amount of the debt in cash upon conversion, with the conversion premium paid in cash or stock at our option, potentially
dilutive common shares are determined by applying the treasury stock method.

For the first quarter of 2012, we excluded 19 million
outstanding weighted average stock options (125 million for the first quarter of 2011) from the calculation of diluted earnings per common share because the exercise prices of these stock options were greater than or equal to the average market
value of the common shares. These options could be included in the calculation in the future if the average market value of the common shares increases and is greater than the exercise price of these options. In the first quarter of 2012, we
included our 2009 debentures in the calculation of diluted earnings per common share because the average market price was above the conversion price. In the first quarter of 2011, we excluded the 2009 debentures from the calculation of diluted
earnings per common share because the conversion option of the debentures was anti-dilutive, and we could potentially exclude the 2009 debentures again in the future if the average market price is below the conversion price.

Note 19: Comprehensive Income

The components of accumulated other comprehensive income, net of tax, at the end of each period, as well as the activity, were as
follows:

We are currently a party to various legal proceedings, including those noted in this section. While management presently believes that the ultimate outcome of these proceedings, individually and in the
aggregate, will not materially harm the companys financial position, results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings
or other events could occur. Unfavorable resolutions could include substantial monetary damages, and in matters for which injunctive relief or other conduct remedies are sought, an injunction or other order prohibiting us from selling one or more
products at all or in particular ways, precluding particular business practices, or requiring other remedies such as compulsory licensing of intellectual property rights (IP). Were unfavorable final outcomes to occur, there exists the possibility of
a material adverse impact on our business, results of operations, financial position, and overall trends. It is also possible that we could conclude it is in the best interests of our stockholders, employees, and customers to settle one or more such
matters, and any such settlement could include substantial payments; however, we have not reached this conclusion with respect to any particular matter at this time.

A number of proceedings generally have challenged and continue to challenge certain of our competitive
practices. The allegations in these proceedings vary and are described in more detail in the following paragraphs, but in general contend that we improperly condition price rebates and other discounts on our microprocessors on exclusive or
near-exclusive dealing by some of our customers; claim that our software compiler business unfairly prefers Intel microprocessors over competing microprocessors and that, through the use of our compiler and other means, we have caused inaccurate and
misleading benchmark results concerning our microprocessors to be disseminated; allege that we unfairly controlled the content and timing of release of various standard computer interfaces developed by Intel in cooperation with other industry
participants; and accuse us of engaging in various acts of improper competitive activity in competing against what is referred to as general-purpose graphics processing units, including certain licensing practices and our actions in connection with
developing and disclosing potentially competitive technology.

We believe that we compete lawfully and that our marketing, business, IP, and
other challenged practices benefit our customers and our stockholders, and we will continue to conduct a vigorous defense in these proceedings. While we have settled some of these matters, the distractions caused by challenges to our conduct from
the remaining matters are undesirable, and the legal and other costs associated with defending and resolving our position have been and continue to be significant. We assume that these challenges could continue for a number of years and may require
the investment of substantial additional management time and substantial financial resources to explain and defend our position.

Government Competition Matters and Related Consumer Class Actions

In 2001, the European Commission (EC) commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that we used unfair business practices to persuade customers to buy our
microprocessors. We have received numerous requests for information and documents from the EC, and we have responded to each of those requests. The EC issued a Statement of Objections in July 2007 and held a hearing on that Statement in March 2008.
The EC issued a Supplemental Statement of Objections in July 2008.

In May 2009, the EC issued a decision finding that we had violated Article
82 of the EC Treaty and Article 54 of the European Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty) by offering alleged conditional rebates and payments that
required our customers to purchase all or most of their x86 microprocessors from us. The EC also found that we violated Article 82 by making alleged payments to prevent sales of specific rival products. The EC imposed a fine in the
amount of 1.06 billion ($1.447 billion as of May 2009), which we subsequently paid during the third quarter of 2009, and also ordered us to immediately bring to an end the infringement referred to in the EC decision. In the second
quarter of 2009, we recorded the related charge within marketing, general and administrative. We strongly disagree with the ECs decision, and we appealed the decision to the Court of First Instance (which has been renamed the General Court) in
July 2009. A hearing of Intels appeal has been set to commence in July 2012. The courts decision, after oral argument, is expected in late 2012 or early 2013.

The EC decision exceeds 500 pages and does not contain specific direction on whether or how we should modify our business practices. Instead, the decision states that we should cease and
desist from further conduct that, in the ECs opinion, would violate applicable law. We have taken steps, which are subject to the ECs ongoing review, to comply with that decision pending appeal. We opened discussions with the EC to
better understand the decision and to explain changes to our business practices. Based on our current understanding and expectations, we do not believe that any such changes will be material to our financial position, results, or cash flows.

In June 2005, we received an inquiry from the Korea Fair Trade Commission (KFTC) requesting documents from our Korean subsidiary related
to marketing and rebate programs that we entered into with Korean PC manufacturers. In February 2006, the KFTC initiated an inspection of documents at our offices in Korea. In September 2007, the KFTC served on us an Examination Report alleging that
sales to two customers during parts of 20022005 violated Koreas Monopoly Regulation and Fair Trade Act. In December 2007, we submitted our written response to the KFTC. In February 2008, the KFTCs examiner submitted a written reply
to our response. In March 2008, we submitted a further response. In April 2008, we participated in a pre-hearing conference before the KFTC, and we participated in formal hearings in May and June 2008. In June 2008, the KFTC announced its intent to
fine us approximately $25 million for providing discounts to Samsung Electronics Co., Ltd. and TriGem Computer Inc. In November 2008, the KFTC issued a final written decision concluding that our discounts had violated Korean antitrust law and
imposing a fine on us of approximately $20 million, which we paid in January 2009. In December 2008, we appealed this decision by filing a lawsuit in the Seoul High Court seeking to overturn the KFTCs decision. We expect a decision from the
court in 2012.

At least 82 separate class actions have been filed in the U.S. District Courts for the Northern District
of California, Southern District of California, District of Idaho, District of Nebraska, District of New Mexico, District of Maine, and District of Delaware, as well as in various California, Kansas, and Tennessee state courts. These actions
generally repeat the allegations made in a now-settled lawsuit filed against Intel by AMD in June 2005 in the U.S. District Court for the District of Delaware (AMD litigation). Like the AMD litigation, these class-action suits allege that Intel
engaged in various actions in violation of the Sherman Act and other laws by, among other things, providing discounts and rebates to our manufacturer and distributor customers conditioned on exclusive or near-exclusive dealings that allegedly
unfairly interfered with AMDs ability to sell its microprocessors, interfering with certain AMD product launches, and interfering with AMDs participation in certain industry standards-setting groups. The class actions allege various
consumer injuries, including that consumers in various states have been injured by paying higher prices for computers containing our microprocessors. We dispute the class-action claims and intend to defend the lawsuits vigorously.

All of the federal class actions and the Kansas and Tennessee state court class actions have been transferred by the Multidistrict Litigation Panel to
the U.S. District Court in Delaware for all pre-trial proceedings and discovery (MDL proceedings). The Delaware district court has appointed a Special Master to address issues in the MDL proceedings, as assigned by the court. In January 2010, the
plaintiffs in the Delaware action filed a motion for sanctions for our alleged failure to preserve evidence. This motion largely copies a motion previously filed by AMD in the AMD litigation, which has settled. The plaintiffs in the MDL proceedings
also moved for certification of a class of members who purchased certain PCs containing products sold by Intel. In July 2010, the Special Master issued a Report and Recommendation (Class Report) denying the motion to certify a class. The MDL
plaintiffs filed objections to the Special Masters Class Report, and a hearing on these objections was held in March 2011. The Delaware district court has not yet ruled on those objections. All California class actions have been consolidated
in the Superior Court of California in Santa Clara County. The plaintiffs in the California actions have moved for class certification, which we are in the process of opposing. At our request, the court in the California actions has agreed to delay
ruling on this motion until after the Delaware district court rules on the similar motion in the MDL proceedings. Based on the procedural posture and the nature of the cases, including, but not limited to, the fact that the Special Masters
Class Report is on review in the Delaware district court, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters.

Lehman Matter

In November 2009, representatives of the Lehman
Brothers OTC Derivatives Inc. (LOTC) bankruptcy estate advised us informally that the estate was considering a claim against us arising from a 2008 contract between Intel and LOTC. Under the terms of the 2008 contract, Intel prepaid $1.0 billion to
LOTC, in exchange for which LOTC was required to purchase and deliver to Intel the number of shares of Intel common stock that could be purchased for $1.0 billion at the discounted volume-weighted average price specified in the contract for the
period September 2, 2008 to September 26, 2008. LOTCs performance under the contract was secured by $1.0 billion of cash collateral. Under the terms of the contract, LOTC was obligated to deliver approximately 50 million shares
of our common stock to us on September 29, 2008. LOTC failed to deliver any shares of our common stock, and we exercised our right to setoff against the $1.0 billion collateral. LOTC has not initiated any action against us to date, but in
February 2010, LOTC served a subpoena on us in connection with this transaction. In October 2010, LOTC demanded that Intel pay it at least $417 million. In September 2010, we entered into an agreement with LOTC that tolled any applicable
statutes of limitations for 90 days and precluded the parties from commencing any formal proceedings to prosecute any claims against each other in any forum during that period. The tolling agreement with LOTC was extended several times, but lapsed
in June 2011. We continue to believe that we acted appropriately under our agreement with LOTC, and we intend to defend any claim to the contrary. No complaint has been filed and we are in the early stages of evaluating this dispute, and accordingly
are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from this matter.

We are reorganizing our smartphone, tablet, and mobile communication businesses within other Intel architecture operating
segments to enable us to move faster and with greater collaboration and synergies in the market segment for mobile devices. The other Intel architecture operating segments will also continue to include our embedded and netbook businesses. We are
currently in the process of making these changes to our organization and our systems. Given the scope of the business lines being impacted, this reorganization is expected to be completed in the second quarter of 2012 and reported in our earnings
release Form 8-K for the quarter ended June 30, 2012.

The Chief Operating Decision Maker (CODM) is our President and Chief Executive
Officer. The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss).

Our PC Client Group and our Data Center Group are reportable operating segments. We also aggregate and disclose the financial results of our non-reportable operating segments within other Intel
architecture operating segments and software and services operating segments as shown in the above operating segments list. Each of these aggregated operating segments does not meet the quantitative thresholds to qualify as
reportable operating segments; however, we have elected to disclose the aggregation of these non-reportable operating segments. Revenue for our reportable and aggregated non-reportable operating segments is primarily related to the following product
lines:



PC Client Group
. Includes platforms designed for the notebook and desktop (including high-end enthusiast PCs) market segments; and wireless
connectivity products.



Data Center Group.
Includes platforms designed for the server, workstation, and storage computing market segments; and wired network
connectivity products.



Other Intel architecture operating segments.
Includes mobile phone components such as baseband processors, radio frequency transceivers, and
power management chips; platforms designed for embedded applications; platforms for the netbook and tablet market segments; and products designed for the smartphone market segment.



Software and services operating segments.
Includes software products for endpoint security, network and content security, risk and compliance,
and consumer and mobile security from our McAfee business; software optimized products for the embedded and mobile market segments; and software products and services that promote Intel
®
architecture as the platform of choice for software development.

We have sales and marketing, manufacturing, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments, and the expenses are included in the operating
results reported below.

The All other category includes revenue, expenses, and charges such as:



results of operations from our Non-Volatile Memory Solutions Group that includes NAND flash memory products for use in a variety of devices;



a portion of profit-dependent compensation and other expenses not allocated to the operating segments;



results of operations of seed businesses that support our initiatives; and



acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.

The CODM does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not
allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments.
Except for these differences, the accounting policies for segment reporting are the same as for Intel as a whole.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the
accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:



Overview
. Discussion of our business and overall analysis of financial and other highlights affecting the company in order to provide context
for the remainder of MD&A.



Results of Operations
. An analysis of our financial results comparing the three months ended March 31, 2012 to the three months ended
April 2, 2011.



Liquidity and Capital Resources
. An analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and
potential sources of liquidity.



Fair Value of Financial Instruments
. Discussion of the methodologies used in the valuation of our financial instruments.

This interim MD&A should be read in conjunction with the MD&A in our Annual Report on Form 10-K for the year ended
December 31, 2011. The various sections of this MD&A contain a number of forward-looking statements. Words such as expects, goals, plans, believes, continues, may,
will, and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and
trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described
throughout this filing and particularly in Risk Factors in Part I, Item 1A of our Form 10-K, as updated in this Form 10-Q. In particular (i) our gross margin percentage could vary significantly from expectations based on a
number of factors including capacity utilization, variations in inventory valuation, changes in revenue levels, segment product mix and the timing and execution of the manufacturing ramp and associated costs, (ii) demand could be different from
expectations due to factors including changes in business and economic conditions, including supply constraints, customer acceptance of products, changes in customer order patterns and changes in the level of inventory at customers and (iii) our
revenue and gross margin percentage are affected by factors such as the timing of our product introductions and the demand for and market acceptance of our products, actions taken by our competitors and our ability to respond quickly to
technological developments. Our actual results may differ materially, and these forward-looking statements do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as
of May 4, 2012.

Overview

Our results of operations were as follows:

(Dollars in Millions)

Q1 2012

Q4 2011

Q1 2011

Net revenue

$

12,906

$

13,887

$

12,847

Gross margin

$

8,265

$

8,952

$

7,885

Gross margin percentage

64.0

%

64.5

%

61.4

%

Operating income

$

3,810

$

4,599

$

4,158

Net income

$

2,738

$

3,360

$

3,160

Diluted earnings per common share

$

0.53

$

0.64

$

0.56

Revenue in the first quarter of 2012 was slightly above the midpoint of the Business Outlook we provided in January and
down 7% from the fourth quarter of 2011 as the floods in Thailand and the resulting disk drive supply shortage continued to negatively impact our results. We believe that the hard disk drive supply situation improved as we progressed through the
first quarter and we do not expect it to have a negative impact on our business going forward. We expect our second quarter revenue to exceed normal seasonal trends as customer inventory levels begin to recover from the disk drive supply shortage.
Looking to the second half of 2012, we expect the PC supply chain to refill and the trends of strength in emerging markets, the data center, and enterprise that drove our results in 2011 continue.

Our first quarter 2012 gross margin percentage declined from the fourth quarter of 2011 as higher platform unit costs and lower
platform volume were partially offset by a decline in start-up costs. In the first quarter of 2012, we increased inventory by $393 million, primarily due to the ramp of our 3rd generation Intel
®
Core

processor family
(formerly code named Ivy Bridge) partially offset by a significant reduction in older generation products. As we sell this higher cost Ivy Bridge product inventory and continue to ramp production of these products in three factories with
a fourth factory ramping in the second half of the year, we expect our gross margin percentage will decline by 2 percentage points in the second quarter based on the mid-point of our Business Outlook. We expect the gross margin percentage to
increase in the second half of 2012 as that ramp brings unit costs down the cost curve.

26

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

We continue to extend our process technology leadership and are in the midst of
refreshing our product lines across our segments. In April of 2012, we launched our first Ivy Bridge products, which are based on our 22nm process technology. Products based on this technology utilize three-dimensional Tri-Gate transistor
technology, which improves performance and energy efficiency compared to prior generation products. We expect these products to help accelerate the ramp of Ultrabook systems; we are increasing our marketing expense in the second quarter of
2012 as we start a significant Ultrabook system marketing campaign. With the launch of our Intel
®
Xeon
®
Processor E5-2600 Series (formerly code named Romley) in the first quarter of 2012, we are also
refreshing products in our data center market segment. This product family significantly increases performance and energy efficiency from the prior generation. We also continue to focus on our strategy for the smartphone market segment and announced
in April of 2012 that Lava International Ltd., an India based mobile handset company, is offering the first Intel architecture based smartphone.

From a financial condition perspective, we ended the first quarter of 2012 with an investment portfolio of $13.8 billion (consisting of cash and cash equivalents, short-term investments, and trading
assets) down $1.1 billion from the fourth quarter of 2011. During the first quarter of 2012, we generated $3.0 billion in cash from operations, received $1.2 billion on employees exercise of stock option awards, purchased $3.0 billion in
capital assets, repurchased $1.5 billion of common stock through our common stock repurchase program, and returned $1.0 billion to stockholders through dividends. In March, our Board of Directors declared a dividend of $0.21 per common
share to be paid in June.

Our Business Outlook for the second quarter and full-year 2012 includes, where applicable, our current expectations
for revenue, gross margin percentage, spending (R&D plus MG&A), and capital expenditures. We will keep our most current Business Outlook publicly available on our Investor Relations web site at www.intc.com. This Business Outlook is not
incorporated by reference into this Form 10-Q. We expect that our corporate representatives will, from time to time, meet publicly or privately with investors and others, and may reiterate the forward-looking statements contained in Business Outlook
or in this Form 10-Q. The public can continue to rely on the Business Outlook published on the web site as representing our current expectations on matters covered, unless we publish a notice stating otherwise. The statements in Business
Outlook and forward-looking statements in this Form 10-Q are subject to revision during the course of the year in our quarterly earnings releases and SEC filings and at other times.

The forward-looking statements in Business Outlook will be effective through the close of business on June 15, 2012 unless updated earlier. From the close of business on June 15, 2012 until our
quarterly earnings release is published, presently scheduled for July 17, 2012, we will observe a quiet period. During the quiet period, Business Outlook and other forward-looking statements first published in our Form 8-K filed on
April 17, 2012, and other forward-looking statements disclosed in the companys news releases and filings with the SEC, as reiterated or updated as applicable in this Form 10-Q, should be considered historical, speaking as of prior to
the quiet period only and not subject to update. During the quiet period, our representatives will not comment on our Business Outlook or our financial results or expectations. The exact timing and duration of the routine quiet period, and any
others that we utilize from time to time, may vary at our discretion.

27

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Results of Operations

First Quarter of 2012 Compared to First Quarter of 2011

The following table sets forth certain consolidated condensed statements of income data as a percentage of net revenue for the periods
indicated:

Q1 2012

Q1 2011

(Dollars in Millions, Except Per Share Amounts)

Dollars

% of
Net
Revenue

Dollars

% of
Net
Revenue

Net revenue

$

12,906

100.0

%

$

12,847

100.0

%

Cost of sales

4,641

36.0

%

4,962

38.6

%

Gross margin

8,265

64.0

%

7,885

61.4

%

Research and development

2,401

18.6

%

1,916

14.9

%

Marketing, general and administrative

1,973

15.3

%

1,775

13.8

%

Amortization of acquisition-related intangibles

81

0.6

%

36

0.3

%

Operating income

3,810

29.5

%

4,158

32.4

%

Gains (losses) on equity investments, net

(19

)

(0.1)

%

28

0.2

%

Interest and other, net

23

0.2

%

185

1.4

%

Income before taxes

3,814

29.6

%

4,371

34.0

%

Provision for taxes

1,076

8.4

%

1,211

9.4

%

Net income

$

2,738

21.2

%

$

3,160

24.6

%

Diluted earnings per common share

$

0.53

$

0.56

The following table sets forth information of geographic regions for the periods indicated:

Q1 2012

Q1 2011

(Dollars In Millions)

Revenue

% of Total

Revenue

% of Total

Asia-Pacific

$

7,368

57

%

$

7,262

56

%

Americas

2,553

20

%

2,715

21

%

Europe

1,778

14

%

1,645

13

%

Japan

1,207

9

%

1,225

10

%

Total

$

12,906

100

%

$

12,847

100

%

Our net revenue for Q1 2012, which was a 13 week quarter, increased $59 million compared to Q1 2011, which was a 14 week
quarter. Q1 2012 included a full quarter of revenue from the acquisitions of the Wireless Solutions (WLS) business of Infineon Technologies AG (now Intel Mobile Communications) and McAfee, Inc. The WLS business of Infineon was acquired at the end of
January 2011 and McAfee was acquired at the end of February 2011. Slightly higher platform (microprocessor and chipset) average selling prices also contributed to the increase. These increases were offset by slightly lower platform unit sales.
Revenue in the Europe and Asia-Pacific regions increased by 8% and 1%, respectively, while revenue in the Americas and Japan regions decreased by 6% and 1%, respectively, compared to Q1 2011.

Our overall gross margin dollars for Q1 2012 increased $380 million, or 5%, compared to Q1 2011. The increase was primarily due to a
$343 million charge recorded in the first quarter of 2011 to repair and replace materials and systems impacted by a design issue related to our Intel
®
6 Series Express Chipset Family. Additionally, we had lower start-up costs compared to Q1 2011 as we transition from manufacturing start-up costs related to our 22nm
process technology to R&D of our next-generation 14nm process technology. These increases to our gross margin dollars were partially offset by higher inventory write-offs. The amortization of acquisition-related intangibles resulted in a $137
million reduction to our overall gross margin dollars in Q1 2012, compared to $73 million in Q1 2011, primarily due to the acquisitions of McAfee and the WLS business of Infineon Technologies.

Our overall gross margin percentage increased to 64.0% in Q1 2012 from 61.4% in Q1 2011. The increase in the gross margin percentage was primarily
attributable to the gross margin percentage increase in the PC Client Group. We derived a substantial majority of our overall gross margin dollars in Q1 2012 and Q1 2011, from the sale of platforms in the PC Client Group and Data Center Group
operating segments.

28

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

PC Client Group

The revenue and operating income for the PC Client Group (PCCG) operating segment for Q1 2012 and Q1 2011 were as follows:

(In Millions)

Q1 2012

Q1 2011

Net revenue

$

8,451

$

8,621

Operating income

$

3,483

$

3,543

Net revenue for the PCCG operating segment decreased by $170 million, or 2%, in Q1 2012 compared to Q1 2011. Platforms
within PCCG include those designed for the notebook and desktop computing market segments. The decrease in revenue was due to slightly lower notebook platform average selling prices.

Operating income decreased by $60 million in Q1 2012 compared to Q1 2011. The decrease in operating income was due to higher
operating expenses, lower revenue, and higher inventory write-offs compared to Q1 2011. These decreases were partially offset by a $343 million charge recorded in the first quarter of 2011 to repair and replace materials and systems impacted by a
design issue related to our Intel
®
6 Series Express Chipset Family. Additionally, start-up costs in Q1 2012 were
approximately $225 million lower compared to Q1 2011.

Data Center Group

The revenue and operating income for the Data Center Group (DCG) operating segment for Q1 2012 and Q1 2011 were as follows:

(In Millions)

Q1 2012

Q1 2011

Net revenue

$

2,453

$

2,464

Operating income

$

1,143

$

1,222

Net revenue for the DCG operating segment decreased by $11 million in Q1 2012 compared to Q1 2011. The decrease in
revenue was primarily due to lower server platform unit sales, mostly offset by higher server platform average selling prices.

Operating
income decreased by $79 million in Q1 2012 compared to Q1 2011. The decrease in operating income was primarily due to higher operating expenses.

Other Intel Architecture Operating Segments

The revenue and operating income (loss)
for the other Intel architecture (Other IA) operating segments, including Intel Mobile Communications (IMC), the Intelligent Systems Group (ISG), the Netbook and Tablet Group (NTG), and the Ultra-Mobility Group (UMG), for Q1 2012 and Q1 2011 were as
follows:

(In Millions)

Q1 2012

Q1 2011

Net revenue

$

1,075

$

1,149

Operating income (loss)

$

(312

)

$

(36

)

Net revenue for the Other IA operating segments decreased by $74 million, or 6%, in Q1 2012 compared to Q1 2011. The
decrease was primarily due to significantly lower netbook platform unit sales and average selling prices within NTG. Q1 2012 included a full quarter of IMC revenue. The WLS business of Infineon was acquired at the end of January 2011.

Operating loss for the Other IA operating segments increased by $276 million in Q1 2012 compared to Q1 2011. The increase in operating loss was driven by
significantly lower netbook revenue within NTG and a full quarter of IMC operating results.

29

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Software and Services Operating Segments

The revenue and operating income (loss) for the software and services operating segments, including McAfee, the Wind River Software Group, and the
Software and Services Group, for Q1 2012 and Q1 2011 were as follows:

$2,401

$2,401

(In Millions)

Q1 2012

Q1 2011

Net revenue

$

571

$

240

Operating income (loss)

$

7

$

(52

)

Net revenue and operating results for the software and services operating segments improved by $331 million and $59
million, respectively, in Q1 2012 compared to Q1 2011. Q1 2012 included a full quarter of McAfee revenue and operating income. McAfee was acquired at the end of February 2011.

Operating Expenses

Operating expenses for Q1 2012 and Q1 2011 were as follows:

$2,401

$2,401

(In Millions)

Q1 2012

Q1 2011

Research and development

$

2,401

$

1,916

Marketing, general and administrative

$

1,973

$

1,775

Amortization of acquisition-related intangibles

$

81

$

36

Research and Development.
R&D spending increased by $485 million, or 25%, in Q1 2012 compared to Q1 2011. The
increase was primarily due to higher compensation expenses based on an increase in employees, higher process development costs due to R&D of our next-generation 14nm process technology, and the full quarter expenses of McAfee and IMC, both
acquired in Q1 2011. These increases were partially offset by an extra work week in Q1 2011.

Marketing, General and Administrative
.
Marketing, general and administrative expenses increased $198 million, or 11%, in Q1 2012 compared to Q1 2011. The increase was primarily due to the full quarter expenses of McAfee and IMC, both acquired in Q1 2011, and higher compensation expenses
based on an increase in employees. These increases were partially offset by an extra work week in Q1 2011.

R&D, combined with marketing,
general and administrative expenses, were 34% of net revenue in Q1 2012 (29% of net revenue in Q1 2011).

Amortization of
acquisition-related intangibles.
The increase of $45 million was primarily due to a full quarter of amortization of intangibles in the first quarter of 2012, compared to a partial quarter of amortization in the first quarter of 2011, related to
the acquisitions of McAfee and the WLS business of Infineon, both completed in the first quarter of 2011.

Gains (Losses) on Equity
Investments and Interest and Other

Gains (losses) on equity investments, net and interest and other, net were as follows:

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.

Cash from operations for the first quarter of 2012 was $3.0 billion, a decrease of $1.0 billion compared to the first quarter of 2011, primarily due to changes in our working capital and lower net income,
partially offset by adjustments for non-cash items. The adjustments for non-cash items were higher primarily due to higher depreciation and amortization of intangibles in the first quarter of 2012 as compared to the first quarter of 2011, as well as
the gain recognized upon the formation of the Intel-GE Innovations, LLC joint venture in the first quarter of 2011.

Changes in assets and
liabilities as of March 31, 2012 compared to December 31, 2011 included the following:



Accrued compensation and benefits decreased due to the payout of 2011 profit-dependent compensation.



Accounts receivable increased due to a higher proportion of sales at the end of the first quarter of 2012 and lower cash receipts as a percentage of
revenue in the first quarter of 2012.

Income taxes payable increased as our U.S. federal estimated income tax payment for the first quarter of 2012 is paid in the second quarter.

For the first quarter of 2012, our two largest customers accounted for 32% of net revenue (34% for the first quarter of
2011) with one of those customers accounting for 18% of our net revenue, and another customer accounting for 14% of our net revenue. These two largest customers accounted for 35% of net accounts receivable at March 31, 2012 (32% at
December 31, 2011).

31

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Investing Activities

The increase in cash used for investing activities in the first quarter of 2012, compared to the first quarter of 2011, was primarily due to a decrease in net sales and maturities of available-for-sale
investments and trading assets, mostly offset by a decrease in cash paid for acquisitions.

Financing Activities

The decrease in cash used for financing activities in the first quarter of 2012, compared to the first quarter of 2011, was primarily due to lower
repurchases of common stock under our authorized common stock repurchase program and higher proceeds from the sale of shares through employee equity incentive plans.

Liquidity

Cash generated by operations is our primary source of liquidity. We
maintain a diverse portfolio that we continuously analyze based on issuer, industry, and country. As of March 31, 2012, cash and cash equivalents, short-term investments, and marketable debt instruments included in trading assets totaled $13.8
billion ($14.8 billion as of December 31, 2011). In addition to the $13.8 billion, we have $1.3 billion in loans receivable and other long-term investments that we include when assessing our investment portfolio. Substantially all of our
investments in debt instruments are with A/A2 or better rated issuers, and a majority of the issuers are rated AA-/Aa3 or better.

Our
commercial paper program provides another potential source of liquidity. We have an ongoing authorization from our Board of Directors to borrow up to $3.0 billion, including through the issuance of commercial paper. Maximum borrowings under our
commercial paper program during the first quarter of 2012 were $500 million, and $250 million of commercial paper remained outstanding as of March 31, 2012. Our commercial paper was rated A-1+ by Standard & Poors and P-1 by
Moodys as of March 31, 2012. We also have an automatic shelf registration statement on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities.

We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital expenditures for worldwide
manufacturing and assembly and test; working capital requirements; and potential dividends, common stock repurchases, and acquisitions or strategic investments.

Fair Value of Financial Instruments

When determining fair value, we consider the principal
or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. For further information, see Note 3: Fair Value in the Notes to Consolidated
Condensed Financial Statements of this Form 10-Q.

Credit risk is factored into the valuation of financial instruments that we measure and
record at fair value. When fair value is determined using pricing models, such as a discounted cash flow model, the obligors credit risk is factored into the calculation of the fair value, as appropriate.

32

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Marketable Debt Instruments

As of March 31, 2012, our assets measured and recorded at fair value on a recurring basis included $13.5 billion of marketable debt instruments. Of these instruments, $5.4 billion was classified as
Level 1, $7.9 billion as Level 2, and $181 million as Level 3.

Our balance of marketable debt instruments that are measured and recorded at
fair value on a recurring basis and classified as Level 1 was classified as such due to the use of observable market prices for identical securities that are traded in active markets. Management judgment was required to determine the levels for the
frequency of transactions that should be met for a market to be considered active. Our assessment of an active market for our marketable debt instruments generally takes into consideration the number of days each individual instrument trades over a
specified period.

Of the $7.9 billion balance of marketable debt instruments measured and recorded at fair value on a recurring basis and
classified as Level 2, approximately 60% of the balance was classified as Level 2 due to the use of a discounted cash flow model and approximately 40% due to the use of non-binding market consensus prices that were corroborated with observable
market data.

Our marketable debt instruments that are measured and recorded at fair value on a recurring basis and classified as Level 3 were
classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the non-binding broker quotes. When observable market data is not available, we corroborate our fair value measurements
using non-binding market consensus prices and non-binding broker quotes from a second source.

Loans Receivable

As of March 31, 2012, our assets measured and recorded at fair value on a recurring basis included $780 million of loans receivable. All of these
loans were classified as Level 2, as the fair value is determined using a discounted cash flow model with all significant inputs derived from or corroborated with observable market data.

Marketable Equity Securities

As of March 31, 2012, our assets measured and
recorded at fair value on a recurring basis included $819 million of marketable equity securities. A substantial majority of these securities were classified as Level 1 because the valuations were based on quoted prices for identical securities in
active markets. Our assessment of an active market for our marketable equity securities generally takes into consideration the number of days that each individual equity security trades over a specified period.

33

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are directly and indirectly affected by changes in equity prices, non-U.S. currency exchange rates, and interest rates. Our market risk profile has not changed materially during the first three months
of 2012. Please refer to the discussion about market risk and sensitivity analysis in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of
Disclosure Controls and Procedures

Based on managements evaluation (with the participation of our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in U.S. Securities and Exchange Commission rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2012, we implemented new cost and inventory software. This is part of our ongoing process to replace software
to support our evolving needs. We believe this software strengthens our internal control environment through improved automation, integration with manufacturing flows, and scalability. There were no other changes to our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or
that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or procedures.

34

PART II  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For a discussion of
legal proceedings, see Note 20: Contingencies in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q.

ITEM 1A.

RISK FACTORS

The risks described in
Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2011, could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all risks
that we faceour operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. The Risk Factors section of our 2011 Annual Report on Form10-K remains current
with the exception of the revised risk factor below.

Changes in the mix of products sold may harm our financial results.

Because of the wide price differences of platform average selling prices among our data center, PC client, and other Intel
architecture platforms, a change in the mix of platforms among these market segments may impact our revenue and gross margin. For example, our PC client platforms that are incorporated into notebook and desktop computers tend to have lower average
selling prices and gross margin than our data center platforms that are incorporated into servers, workstations and storage products. Therefore, if there is less demand for our data center platforms, and a resulting mix shift to our PC client
platforms, our gross margins and revenue would decrease. Also, more recently introduced products tend to have higher costs because of initial development costs and lower production volumes relative to the previous product generation which can impact
gross margin.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We have an ongoing authorization, since October
2005, as amended, from our Board of Directors to repurchase up to $45 billion in shares of our common stock in open market or negotiated transactions. As of March 31, 2012, $8.6 billion remained available for repurchase under the
existing repurchase authorization limit.

Common stock repurchase activity under our authorized, publicly announced plan during the first
quarter of 2012 was as follows (in millions, except per share amounts):

Period

Total Number
of
Shares
Purchased

Average Price
Paid per
Share

Dollar Value of
Shares
that May
Yet Be Purchased
Under the Plan

January 1, 2012-January 28, 2012

28.3

$

25.66

$

9,372

January 29, 2012-February 25, 2012

11.4

$

26.66

$

9,068

February 26, 2012-March 31, 2012

17.2

$

27.32

$

8,598

Total

56.9

$

26.36

For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units
vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. Although these withheld shares are not issued or considered common stock repurchases under our
authorized plan and are not included in the common stock repurchase totals in the preceding table, they are treated as common stock repurchases in our financial statements, as they reduce the number of shares that would have been issued upon
vesting.

Certification of the Chief Executive Officer and the Chief Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

Intel, Intel Core, Intel logo, Intel Xeon, and Ultrabook are trademarks of Intel Corporation in the U.S. and/or other countries.

* Other names and brands may be claimed as the property of others.

** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.